Employee Output Response to Stock Market Wealth Shocks

51 Pages Posted: 27 Aug 2020 Last revised: 11 May 2022

See all articles by Teng Li

Teng Li

Sun Yat-sen University

Wenlan Qian

HKU Business School; National University of Singapore - NUS Business School

Wei A. Xiong

Shenzhen Stock Exchange

Xin Zou

Hong Kong Baptist University (HKBU)

Date Written: October 7, 2021

Abstract

This paper uses individual-level data linking stock investments with work performance to examine how changes in stock market wealth affect worker output. We document that a 10% increase in monthly income from stock market investments is associated with a decrease of 3.8% in the same investor’s next-month work output. The negative output response is not driven by concurrent economic conditions and is unexplained by investor-specific liquidity needs. Consistent with the reference dependence interpretation, the response is short-lived and the effect is stronger when the total income has reached a reference income. Overall, our results highlight a novel channel of transmitting stock market fluctuation through labor supply.

Keywords: Stock Investment Return, Stock Market Wealth, Consumption, Worker Output, Work Performance, Labor Supply, Reference Dependence, Household Finance

JEL Classification: D14, G12, G51, J22, J31

Suggested Citation

Li, Teng and Qian, Wenlan and Xiong, Wei A. and Zou, Xin, Employee Output Response to Stock Market Wealth Shocks (October 7, 2021). Journal of Financial Economics (JFE), Forthcoming, Available at SSRN: https://ssrn.com/abstract=3655592 or http://dx.doi.org/10.2139/ssrn.3655592

Teng Li

Sun Yat-sen University ( email )

135, Xingang Xi Road
Guangzhou, Guangdong 510275
China

Wenlan Qian (Contact Author)

HKU Business School ( email )

Pokfulam Road
Hong Kong, Pokfulam HK
China

HOME PAGE: http://sites.google.com/site/wenlanqian/

National University of Singapore - NUS Business School ( email )

15 Kent Ridge Drive
Singapore 117592, 119245
Singapore
(65) 65163015 (Phone)

Wei A. Xiong

Shenzhen Stock Exchange ( email )

2012 Shennan Blvd., Futian District
Shenzhen
China

Xin Zou

Hong Kong Baptist University (HKBU) ( email )

Department of Economics
Kowloon, Hong Kong
Hong Kong

HOME PAGE: http://sites.google.com/site/shirleyxinzou/

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